The Covid-19 pandemic has engulfed the globe and severely impacted economic activity and upended the ways by which business was traditionally carried out. This has necessitated exploring new modes of continuing business operations online while ensuring that social distancing norms are still met. One of the questions we are often asked is the manner in which one can execute and stamp documents during a lockdown. In this note, we will set out the process of executing documents online in the State of Karnataka.

E-stamping:

The Karnataka Stamp Act, 1957 (“Stamp Act”), requires that every instrument chargeable with duty and executed by a person in India must be duly stamped, before or at the time of execution, with a value not less than the amount prescribed under the Stamp Act. ‘Executed’ or ‘execution’ with reference to documents means ‘signed’ or ‘signature’. For an instrument to be considered to be duly stamped (i) the instrument has to be stamped with the required amount, and (ii) stamping should be done in the manner prescribed under the relevant law. Stamp duty is payable only if the instrument relates to transfer of property or any matter or thing done or to be done in Karnataka. Note that while non-payment of stamp duty does not affect the validity of the transaction, it renders the document inadmissible in evidence and is liable to be impounded.

Traditionally, parties are required to buy stamp paper from stamp vendors or frank the document. However, the Government of Karnataka introduced an easier and more convenient method in 2008, in association with the Stock Holding Corporation of India Limited (“SHCIL”), to tackle and prevent fraudulent practices in stamp paper based registrations and transactions by procuring stamp paper electronically and paying the applicable stamp duty online through their website, www.shcilestamp.com. SHCIL has also designated Authorized Collection Centres (“ACC”) which can issue e-stamp paper to users at their respective outlets or at banks upon payment of duty and fees.

The SHCIL website lists out the transactions which require stamping. However, in light of Covid-19, e-stamp paper can only be procured in case of an affidavit and agreement (in other cases) as listed in Article 4 and Article 5J on the website. Parties can use the review function on the SHCIL’s website to ensure the names of the parties and details of the transaction are correct. Further, printing of e-stamp paper is allowed up to 180 days from the date of transfer of funds. Note that payment can be made online only through debit cards, NEFT or UPI. After making the payment, the e-stamp paper can be printed only once per transaction.

Electronic Contracts and Execution of Documents:

Under the Indian Contract Act, 1872, an agreement is valid and can be enforced if it fulfils the requirements of a valid contract, i.e. offer and acceptance, free consent, lawful object, capacity to contract and competence, lawful consideration and legal purpose. Electronic contracts are contracts that are entered into through an electronic mode of communication such as e-mail, internet and fax and Section 10A of the Information Technology Act, 2000 (“IT Act”), confirms the validity and enforceability of such contracts. The electronic agreement subsequent to its execution is stored/recorded with the executing parties in electronic form and is considered as an electronic record under the IT Act. Courts in India recognize the evidentiary value of electronic records under Section 65B of Indian Evidence Act, 1872 (“Evidence Act”).

Note however, Section 1(4) read with the First Schedule of the IT Act states that the provisions of the IT Act shall not be applicable to certain kinds of documents, including, negotiable instruments, power of attorney, trust deeds, wills and any contract for sale or transfer of immovable property. These documents are thus, not valid if they are only in electronic form.

Upon finalization of an agreement, parties tend to meet in person to execute such agreement, which has now been deemed unnecessary. They can print the signature page, and then sign, scan and email it to the other party. It is however advisable that agreements also include a clause to specifically state that the delivery of signed counterparts by email in ″portable document format″ (PDF) shall be as effective as signing and delivering the counterpart in person.

Section 4 (legal recognition of electronic records) read with Section 5 (legal recognition of electronic signatures) of the IT Act also recognizes electronic records authenticated by affixing a digital or electronic signature. Thus, digital signatures, like docusign, etc., are considered as authentic and valid as a physical signature. In keeping with the times, the Evidence Act was amended to include emails and electronic documents as admissible evidence in courts. Note however, courts in India have consistently recognised the fact that as long as parties have agreed to the terms of the arrangement orally, or by way of writing, including by email, the mere fact that a formal written contract was not drawn or the parties have not executed the document, would not affect either the acceptance of the document or the enforcement thereof.

E-Registration:

The Indian Registration Act, 1908 (“Registration Act”) stipulates mandatory registration of the following documents (i) gift deeds relating to an immovable property, (ii) non-testamentary instruments involving interest in any immovable property worth Rs. 100 (one hundred) and above or which acknowledge receipt or payment of any consideration involving a right, title or interest, (iii) lease of immovable property for any term exceeding 1 (one) year, or (iv) contracts for transfer of immovable property, within 4 (four) months of its execution.

The registration process kicks in after stamping of the instrument under the Stamp Act. The Government of Karnataka has provided for online pre-registration of property related documents through Kaveri Online Services portal, with an intent to streamline the registration process and make it simpler. Additionally, the website allows users to access and apply for the property’s digitally signed encumbrance certificate and completion certificate online, upload all relevant documents and book an appointment with the concerned sub-registrar for registration. Non-registration of specified documents as per applicable law will render the transfer invalid.

Final Thoughts:

The Government of Karnataka has taken proactive steps to ease stamping and registration requirements online for the convenience of its residents. Companies can use the above methods to continue undertaking their operations seamlessly in the current scenario using the e-stamping and online registration services.

This update has been contributed by Suchita Ambadipudi (Partner) and Mitali Jain (Associate).